Download the latest issue of Business Today Magazine just for Rs.49

Low Decibel

Demonetisation has led to a Rs 2,000-crore loss for the advertising sector, but it could lead to prudent spends.

Television channels, such as Star Plus or Zee, are allowed to air 12 minutes of advertising per hour. However, in the past one month, ever since the currency demonetisation was announced, advertisements have witnessed a 15-20 per cent dip. Advertisers spend over 45 per cent of their advertising and marketing spends on TV and around 30 per cent on print.

A drop of 15-35 per cent in consumption, following the withdrawal of the Rs 500 and Rs 1,000 currency notes, has led to many big-ticket advertisers cutting almost half of their ad spends, while regional brands have virtually stopped advertising. "There has been a dip in advertising," admits Punit Goenka, Chairman and MD, Zee Entertainment. In fact, Edelweiss Securities, which had said Zee's ad revenues would grow by over 19.4 per cent in the second half of 2016/17, has now revised its estimate to 5.7 per cent.

"We are undertaking some cuts for December. Having said that, for seasonal (winter) products, which were already sold in to trade, we will continue to advertise," says Saugata Gupta, MD and CEO, Marico. A section of market experts believes that demonetisation may actually urge marketers to allocate their marketing rupees more prudently. "It may be short-term budgeting management, but it may also give lead the marketers to reduce their media spends on platforms where 50 per cent of their marketing spends go and they don't even know what for," says Fabio Vacirca, Senior Managing Director, Accenture Products (APAC).

But will this translate into brands reallocating, say, the Rs 2 lakh-3 lakh on a Star Plus ad on prime time, to alternate platforms such as digital? An Edelweiss Securities report says a 30 per cent jump in digital advertising is on the cards. While TV ads may dip from 15 per cent (growth) this year to 11 per cent in 2017, print may drop from 10 per cent to 7.6 per cent.

Marketing specialist Peshwa Acharya says putting a stop to advertising may, however, be a bad idea. "Marketers will look at new channels of spend that are cost-effective. Non-TV spends, such as digital, outdoor and activation, will surely pick up." Angshuman Bhattacharya, MD, Alvarez and Marsal, expects a rise in point-of-sales promotions. "In this situation, BTL activities such as in-shop promotions could incentivise consumers to spend. Brands will only look at targeted activities that will create demand."

But the jury is unanimous on the fact that the dip in ad spends is short term, maybe for a couple of quarters. "It isn't a traditional case of low demand. Once the supply of cash is back, consumption will restart and advertisers will come back with a bang," says Bhattacharya. Ashish Bhasin, Chairman, Dentsu Aegis Network, agrees: "When the economy does well, advertising will also do better. It will grow at least 1.5 times multiples of the GDP." ~